HERITAGE FINANCIAL CORP WA

(19)Commitments and Contingencies

(a) Commitments to Extend Credit

In the ordinary course of business, the Company may enter into various types of transactions that include commitments to extend credit that are not included in its Consolidated Financial Statements. The Company applies the same credit standards to these commitments as it uses in all its lending activities and has included these commitments in its lending risk evaluations. The majority of the commitments presented below are variable rate. Loan commitments can be either revolving or non-revolving. The Company’s exposure to credit and market risk under commitments to extend credit is represented by the amount of these commitments.

The following table presents outstanding commitments to extend credit, including letters of credit, at the dates indicated:

(b) Variable Interests - LIHTC Investments

The carrying values of investments in unconsolidated LIHTCs were $206.8 million and $191.3 million as of December 31, 2023 and December 31, 2022, respectively. During the years ended December 31, 2023, 2022 and 2021 the Company recognized tax benefits of $19.6 million, $12.9 million and $11.4 million, respectively, and proportional amortization of $20.9 million, $10.9 million and $9.7 million, respectively.

Total unfunded contingent commitments related to the Company’s LIHTC investments totaled $107.9 million and $109.2 million at December 31, 2023 and December 31, 2022, respectively. The Company expects to fund LIHTC commitments totaling $29.5 million during the year ending December 31, 2024 and $62.6 million during the year ending December 31, 2025, with the remaining commitments of $15.9 million to be funded by December 31, 2041. There wereno impairment losses on the Company’s LIHTC investments during the years ended December 31, 2023, 2022 and 2021.

(c) Variable Interests - NMTC Investments

The Company dissolved the NMTC investment during the year ended December 31, 2021 after gross tax credits related to the Company's certified development entities totaling $9.8 million were utilized during the seven year period ended December 31, 2020. The equity method balance of the NMTC investment was $25.2 million at December 31, 2020. The Company recognized related investment income of $247,000 during the year ended December 31, 2021.